Regulators have a July deadline to finish the rule, but officials have said it appears unlikely they will meet it.

The October draft rule issued by the Fed, the Securities and Exchange Commission and other regulators permits what is known as "portfolio hedging," or buying and selling in order to reduce the risk of a portfolio of securities held at the bank.

Messrs. Merkley and Levin say regulators inserted a "loophole" into the rule's draft.

The Dodd-Frank law says banks can conduct hedging activities related to "individual or aggregated positions."

It is unclear whether that includes buying or selling to hedge against an economic downturn or another broad event that is difficult to match with individual security purchases.

"You would decrease bank safety and soundness materially if you didn't allow for macro hedging," said Eugene Ludwig, a former comptroller of the currency and now chief executive of financial-consulting firm Promontory Financial Group.

Some argue that the goal of regulation isn't to completely eliminate mistakes and losses from the financial system.

Why didn't Congress wait to vote on a final version of the Volcker Rule? DoddFrank has been law since July 21, 2010, and we still don't know what it means. This is just as dumb as the Health Care bill, where HHS Sebelius is still writing the legislation. And the Pelosi quote rings true; "We have to pass the bill to see what is in it".

Named after former Federal Reserve Chairman Paul Volcker, the Volcker rule basically stops banks from doing their normal business (installment loans, residential mortgages, equity credit loans, deposit services) as well as trading on their own behalf.

4
posted on 05/12/2012 7:15:47 AM PDT
by Son House
(The Economic Boom Heard Around The World => TEA Party 2012)

“firms will eliminate individual traders from the risk management process, in favor of some model that is unspecified, but is suggested by the context to be a risk czar  either human or machine  that holds veto over any trade or position. This is an aggregated, top-down, if you will, socialistic, and flawed model.”

6
posted on 05/12/2012 7:31:13 AM PDT
by Son House
(The Economic Boom Heard Around The World => TEA Party 2012)

They lost money. That is what investment banks do - they make money sometimes and they lose money sometimes. Telling a bank they must try and eliminate trading losses is like telling a plumber he can do his job as long as he doesn’t touch any pipes or toilets.

Thanks, that’s why the Democrats and media are in such an uproar, they are portraying what may be a short-term loss as a complete loss scare to pass more big government, and using regulators so there never has to be a vote.

8
posted on 05/12/2012 9:21:38 AM PDT
by Son House
(The Economic Boom Heard Around The World => TEA Party 2012)

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